HedgeFundBlogger.com Daily Newsletter by Richard Wilson

Hedge Funds Insurance

Study Finds Larger Hedge Funds Buy More Insurance

A new study was conducted on how hedge funds purchase insurance and how much they are paying for it. The findings show that larger hedge funds $10 billion or more AUM tend to purchase more insurance than smaller hedge funds. Furthermore, large hedge funds pay less for their insurance than smaller funds.

The study of 250 hedge fund insurance purchases shows large hedge funds typically purchase $40 million or more in professional liability insurance coverage, nearly 200% more than medium-sized funds.

SKCG says that, dollar for dollar, the bigger funds pay less for their coverage. It also says that strengthened regulation and "heightened investor expectations" make it impractical for larger funds to pay out of pocket for the costs of trading errors, investor and SEC lawsuits, and investigations.

"Before the financial crisis, it wasn't uncommon for large hedge funds to just eat the costs of investigations and lawsuits resulting from trading errors and other mistakes. This simply doesn't make sense anymore when the price of insurance against these costs has declined by as much as 20% in the last two years and is even more inexpensive to the largest funds who buy higher limits," said Wayne Siebner, senior vice president and manager of executive and professional kiability for SKCG Group. Source

Cohen Account

Cohen Account Examined by U.S. Prosecutors in Court Case

Federal prosecutors are looking into trades made in an account overseen by mega hedge fund manager Steven Cohen that to him were suggested by two of his former fund managers. The two former employees have pleaded guilty to insider trading and now, according to court filings, the prosecution has focused on the "Cohen Account," the personal portfolio account for Mr. Cohen at SAC Capital Advisors.

The development surfaced in court filings submitted in connection with a sweeping insider-trading investigation, which focuses on ways traders can receive nonpublic information from experts connected to industries or firms.

At issue is trading in a $3 billion stock portfolio personally overseen by Mr. Cohen at SAC Capital Advisors and referred to by the government in the filings as the "Cohen Account" and internally at SAC as "The Big Book."

SAC portfolio managers funnel their best trading ideas to Mr. Cohen for this account and are paid a bonus if they generate big returns for Mr. Cohen, according to people familiar with the matter. Source